There are not many more controversial shares than Tesla (NASDAQ: TSLA) the electric car manufacturer that has maintained the car world since the first public offering in 2010.
After first producing a "concept car" Roadster, Tesla moved on to the Model S, a high-end sedan, and the Model X, a luxury SUV. But these achievements pale in comparison to the introduction of the Model 3, Tesla's first mass-market car starting at just over $ 35,000, which was introduced in 2017.
The Model 3 has the potential to be a game changer in the car industry, as a vehicle with low cost can motivate mass adoption of EVs, leading to a virtuous circle where Tesla achieves large economies of scale and increases margins and profits. Next year, the company will introduce the Model Y, a low-cost crossover vehicle that can match or surpass the success of the Model 3. Even more exciting, Tesla plans to unveil its new pickup next week on November 21
Although the stock is only slightly positive for the year, it is up over 45% over the past three months. The surge came after a third-quarter report that beat profit expectations, as well as the excitement surrounding new vehicles that have not yet been introduced.
Of course, Musk and his team are not thinking in the short term, but rather in the long term. And for a long time, Tesla's shares have been hugely profitable for early investors – even though the company is not profitable at the moment because it invests in disruptive growth. So how good have early shareholders done?
The IPO price was how low?
None of these recent successes were guaranteed when the company went public back in June 2010. All investors had to continue was a belief in Elon Musk and his team and their vision of creating the first new public car company in the United States since 1956. By Adding even greater risk, it was an all-electric vehicle, a concept that many large established companies had failed to produce profitable.
Little more than a vision, leading technology and a serial entrepreneur with a good performance record at the helm, Tesla's shares went public with just $ 17 back on June 29, 2010. On the first trading day, the stock soared over 40% to $ 23.89 . Even if you were a public investor who did not attend the IPO, you would still make a small fortune.
Today, Tesla's stock is at $ 347, just over 20 times the stock price and over 14 times the price at the end of the first trading day. This represents a total return of 1,941% and 1,322% respectively. If you had invested $ 5,000 and been lucky enough to enter the $ 17 IPO, your Tesla stock would be worth $ 102,050 today. Over nine years and four months, there is an average annual return of 38.3%.
The current controversy sounds a lot like the past
Of course, Tesla has long been controversial. Even today, many prominent investors such as Jim Chanos and David Einhorn are short Tesla shares. Musk and Einhorn even ended up in a war of words on Twitter recently, with Musk shaking Einhorn's loss of short stakes and Einhorn challenging Tesla's truth about the economy. Some other skeptics have fixed the many executive departures from the company. On the other hand, oxen could conclude that the high turnover is a result of Tesla's demanding workaholics, which provide general benefits.
However, controversy has always followed Tesla, even when the price was a twentieth of where it is now. As you can see, short interest in Tesla has hovered around 20% of the total outstanding shares since 2012.
Needless to say, these short games against Tesla have lost a lot of money so far.
It pays to be optimistic
It's hard to see exactly where Tesla shares will go from here, as the market value has risen to over $ 60 billion and few will ever call it "cheap." It was also hard to see the astonishing success it would have in the market when it went public back in 2010.
However, it was not difficult to know that Elon Musk was smart, technologically savvy and had the vision to launch a highly disruptive product . Musk's pitch was that Tesla had an unmatched pace of innovation that could catapult it past big, bureaucratic and outdated sitting. Given recent results, it appears that Tesla is achieving this promise.
Of course, exciting growth companies don't always work (Moveipass, anyone?). Still, the lesson for investors – especially young investors – is that speculation about disruptive growth companies with heavily invested founder-CEOs can sometimes pay off, and in a big way. As you can see, as long as you are well diversified, the return on just one "Tesla", if kept long term, can make up for many other non-performing growth investments. Just make sure to make a number of bets and sizing according to the risk tolerance.
Tesla seems well on its way to making history. While the stock may not yield massive returns over the past nine years, it will certainly be exciting to watch.